march 5, 2019, cv28, 18, 6664, swallow alvarado v ignite

STATE OF IDAHO )

County of KOOTENAI )ss

FILED mQ1fl2_6.90/7

IN THE DISTRICT COURT 0F THE FIRST JUDICIAL DISTRICT 0F THE

STATE 0F IDAHO IN AND FOR THE COUNTY 0F KOOTENAI

JOHN SWALLow and TYLER ALVARADo,) Case Na cv23-1 3.6664

Plaimiffsa MEMORANDUM DECISION ANDVS- ORDER ON SUMMARY JUDGMENT

)

g

COEUR D’ ALENE URBAN RENEWAL )

AGENCY dba IGNITE CDA, an )

independent public body, corporate and )

politic; and DANIEL W. CLARK, an )

individual, )

Defendants. )

l. PROCEDURAL HISTORY AND FACTUAL BACKGROUND.

Both plaintiffs John Swallow (Swallow) and Tyler Alvarado (Alvarado) on one hand,

and defendant Daniel W. Clark (Clark) on the other hand, believe that they were the

highest bidder at a real estate auction held by defendant Coeur d’Alene Urban Renewal

Agency, dba Ignite CDA (Ignite). Thus, both Swallow/Alvarado and Clark request this

Court to enter an order requiring Ignite to convey the Property to them.

On June 20, 2018, the Board of Commissioners (the Board) for Ignite, declared a

certain parcel of real property as surplus property under Idaho Code Section 50-1401.

Def. Ignite’s Answer to Am. Compl., Countercl., Cross-cl. and Demand for Jury Trial (Def.

Ignite’s Answer), 15, 1] 3. The property is located at, and described as, 311 E. Lakeside

Avenue in Coeur d’Alene, Idaho (the Property).1 Id. The Property is currently owned by

Ignite. Pls.’ Statement of UndiSputed Material Facts in Supp. of Mot. for Summ. J., 1] 2.

1 The property is legally described as CDA & Kings ADD, Lot 9, Block H, URD LAKE

MEMORANDUM DECISION AND ORDER ON SUMMARY JUDGMENT

Clark has been leasing the Property from Ignite since July of 2004. Id. at 1] 3.

Ignite published notice of a sealed bid auction for the sale of the Property in the

Coeur d’Alene Press, and posted the notice on its website. Am. Comp|., 1m 8—9; Def.

Ignite’s Answer, 16, 1] 8. On its website, Ignite also posted the Sealed Bid Auction Packet

(the Bid Packet) outlining the terms and conditions of the sealed bid process. Am.

Compl., 1] 9; see id. at Ex. 1. Pursuant to the terms of the Bid Packet, sealed bids would

be accepted until August 15, 2018 at 3:00 p.m., and the bids would be opened at a public

meeting at 4:00 p.m. that same day. Id. at1] 10; Def. Ignite’s Answer, 16, 1] 10. The Bid

Packet provided that the minimum bid for the Property could not be less than $220,000 -

the appraised value of the Property. Am. Compl., 1] 11. The Bid Packet required bidders

to provide a total bid amount, as well as an additional “tiebreaker” amount should there be

a tie for the highest bid. Id. at 1m 11, 13. The Bid Packet made no mention of allowing

escalation clauses, but did not expressly prohibit the use of them, either; the Bid Packet

also did not expressly prohibit modifications to the forms contained in the Bid Packet.

Def. Ignite’s Answer, 17, 1] 19.

The Court has reviewed the Bid Packet and finds there is no language indicating

that the auction would be a “no reserve” auction, or a “without reserve” auction. As set

forth below, this Court finds the absence of such language to be dispositive.

Prior to submitting his Bid Packet, Clark asked Ignite’s Executive Director, Tony

Berns (Berns), if it was acceptable to include an escalation clause in his bid for the

Property. Mem. in Supp. of Def. Clark’s Mot. for Summ. J., 4, 1] 11. Clark was advised by

Berns that escalation clauses were permitted, as Ignite has historically accepted

escalation clauses in the past in similar sealed bid procedures. Id.; Def. Ignite’s Answer,

DISTRICT 1997 Section 13, Township 50 N., Range 04W, Parcel C180000H0090.


17, 1| 19. Clark informed Berns that he intended to include an escalation clause in his bid.

Mem. in Supp. of Def. Clark’s Mot. for Summ. J., 4, 1] 11.

Three bidders responded to the sealed bid offer: Plaintiffs Swallow and Alvarado,

Defendant Clark, and GVD Partners. Am. Compl., 1] 15. GVD Partners submitted a total

bid amount of $221 ,000; there is no dispute that it is not the highest bidder for the

Property. Id. at 1] 19; id. at Ex. 2. Swallow/Alvarado submitted a tota| bid amount of

$266,000. Id. at 1] 23; id. at Ex. 2. Clark submitted a tota| bid amount of $226,000 and

included the following escalation clause in both the Total Bid Amount section and the Bid

Tiebreaker section:

Escalation Increase to bid: If seller receives a competing offer for this

property in a net amount greater than the amount of this offer, the purchaseprice of this offer will be increased to an amount $500 (Five Hundreddollars) more than the net amount of any other competing offer up to amaximum purchase price of $326,000 (Three Hundred and twenty six

Thousand dollars).

Am. Compl., 1| 27. With the escalation clause, Ignite initially determined that Clark’s bid

became $266,500 — now the highest bid for the Property. Mem. in Supp. of Def. Clark’s

Mot. for Summ. J., 4, 1] 17; Def. Ignite’s Answer, 17, 1| 18. Ignite’s attorney recommended

that the Board accept Clark’s bid as the highest bid in the amount of $266,500. Am.

Compl., 1] 32. Swallow/Alvarado challenged Clark’s use of an escalation clause, causing

the Board to take the matter under advisement. Mem. in Supp. of Def. Clark’s Mot. for

Summ. J., 5, 1] 18. On August 17, 2018, the Board approved a motion to revise the Bid

Packet for the Property to prohibit the use of an escalation clause, and to re-issue the

revised Bid Packet to Swallow/Alvarado and Clark. Id. atfl 19. On August 22, 2018, the

Board held another meeting to allow counsel for Swallow/Alvarado and Clark to address

the Board regarding its decision to revise and re-issue the Bid Packet. Id. at 11 20.

Swallow/Alvarado objected to the Board’s decision and asserted they were the highest


bidders. Mem. in Supp. of Pls.’/Counterdefs.’ Mot. for Summ. J., 2.

Since both SwallowlAlvarado and Clark claim to be the highest bidder, and

because Ignite was unable to determine which party is rightfully entitled to the Property,

Ignite requested that the determination be made by the courts. Mem. in Supp. of Def.

Clark’s Mot. for Summ. J., 5, 1] 21. However, it was not Ignite that sought the

determination by the courts. On August 22, 201 8, Swallow/Alvarado filed their Complaint

for Injunctive and Declaratory Relief against defendants Ignite and Clark. An Amended

Complaint for Declaratory Relief was filed on September 10, 201 8, prior to any party

answering the initial complaint.

It is important to note that at no time did Ignite accept Clark’s bid as the high

bidder. This Court finds that at no time did Ignite accept either Clark’s bid or

Swallow/Alvarado’s bid as the high bid. As set forth below, that fact is dispositive.

On September 17, 2018, Ignite filed an Answer to Amended Complaint,

Counterclaim, Crossclaim and Demand for Jury Trial. On October 9, 2018, Clark filed

Defendant Clark’s Answer to Plaintiffs’ Amended Complaint. On December 17, 2018,

Clark filed Defendant Clark’s Answer and Counterclaim to Crossclaim. On December 18,

2018, this Court held a scheduling conference and set this matter for trial on July 15,

2019. On December 21, 2018, the parties filed a Stipulation to a Nonjury Trial, and an

Order granting such was filed on December 27, 2018. On January 7, 2019, Ignited filed

an Answer to Crossclaim Defendant’s Counterclaim.

On January 31, 2019, Clark filed a Motion for Summary Judgment, Memorandum

in Support of Summary Judgment, Affidavit of Daniel Clark in Support of Motion for

Summary Judgment, and Affidavit of Scott Poorman in Support of Motion for Summary

Judgment. That same day, Swallow/Alvarado filed a Motion for Summary Judgment,

Memorandum in Support of Summary Judgment, Declaration of Megan O’Dowd in


Support of Motion for Summary Judgment, and Plaintiffs’ Statement of Undisputed Facts

in Support of Motion for Summary Judgment. On February 14, 2019, Ignite filed

Defendant Ignite CDA’s Response to Plaintiffs’ Motion for Summary Judgment,

Crossclaim Plaintiff Ignite CDA’s Response to Crossclaim Defendant’s Motion for

Summary Judgment, Affidavit of Tony Berns in Support of Defendant/Crossclaim Plaintiff

Ignite CDA’s Responses to Motions for Summary Judgment. On February 14, 2019,

Swallow/Alvarado filed Plaintiffs/Counterdefendants’ Memorandum in Opposition to

Defendant Daniel W. Clark’s Motion for Summary Judgment. On February 21, 2019,

Swallow/Alvarado filed Plaintiffs/Counterdefendants’ Memorandum in Support of their

Motion for Summary Judgment.

A hearing on both motions was held February 28, 2019. At the conclusion of that

hearing, the Court asked if there was any dispute that Ignite had not accepted any bid.

There was no claim by any party that Ignite had accepted any bid. Given that undisputed

fact, the Court announced that it would likely find this matter was filed prematurely,

because Ignite had not “accepted” any bid. The Court gave counsel for the parties the

basis of its likely decision, explained the two cases the Court had found (Pitchfork Ranch

Company v. Bar TL Com, 615 P.2d 541 (Wyo. 1980), and Ferry v. Udall, 336 F.2d 706

(9th Cir. 1964)) and made it clearthat it would not issue a decision until counsel for the

parties could file any briefing relative to those two cases. The deadline for filing any

briefing was March 4, 2019. On March 4, 2019, Swallow/Alvarado filed

PIaintiffs/Counterdefendants’ Supplemental Memorandum in Support of Their Motion for

Summary Judgment, and Clark responded with an email (which was filed by the Court)

explaining that Clark agreed with Swallow/Alvarado’s memorandum; and Ignite filed its

Ignite CDA’s Supplemental Memorandum of Law. The Court has reviewed those

submissions.


As set forth below, the Court finds this case is prematurely filed because Ignite has

not accepted any bid. Accordingly, neither party’s summary judgment motion will be

addressed.

ll. STANDARD OF REVIEW

The summary judgment standard will not be reiterated here because the Court

finds that it cannot grant summary judgment to either moving party. The Court does note

that there are no material facts in dispute.

This is a declaratory judgment action. Complaint for Injunctive and Declaratory

Relief, 1-1 3. “The authority to render a declaratory judgment is bestowed by statute."

State v. Rhoades, 121 Idaho 63, 69, 822 P.2d 960, 966 (1991), on reh'g (Nov. 14, 1991).

“The Declaratory Judgment Act, contained in Idaho Code Title 10, chapter 12, confers

jurisdiction upon the courts with the option to ‘declare rights, status, and other legal

relations, whether or not further relief is or could be claimed.” Id.; I.C. § 10—1201. One

important limitation on this jurisdiction is that, “a declaratoryjudgment can only be

rendered in a case where an actual or justiciable controversy exists.” Id. (quoting Ham's

v. Cassia County, 106 Idaho 513, 516, 681 P.2d 988, 991 (1984)). “This concept

precludes courts from deciding cases which are purely hypothetical or advisory in

nature.” Id.

“Declaratory judgments by their very nature ride a fine line between purely

hypothetical or academic questions and actually justiciable cases.” Rhoades at 69, 822

P.2d at 966. “Many courts have noted that the test ofjusticiability is not susceptible of

any mechanistic formulation, but must be grappled with according to the specific facts of

each case.” Id. (quoting Ham's at 516, 681 P.2d at 991); see also 22 Am.Jur.2d

Declaratory Judgments § 33, at 697. This Court adopted the following language from the


United States Supreme Court's definition of justiciability as a guiding standard in the

context of declaratory judgment actions:

[A] controversy in this sense must be one that is appropriate forjudicial

determination. A justiciable controversy is thus distinguished from adifference or dispute of a hypothetical or abstract character; from one that is

academic or moot. The controversy must be definite and concrete,

touching the legal relations of parties having adverse legal interests. It mustbe a real and substantial controversy admitting of specific relief through adecree of a conclusive character, as distinguished from an opinion advising

what the law would be upon a hypothetical state of facts. Where there is

such a concrete case admitting of an immediate and definitive

determination of the legal rights of the parties in an adversary proceeding

upon the facts alleged, the judicial function may be appropriately exercised

although the adjudication of the rights of the litigants may not require the

award of process or the payment of damages.

Rhoades at 69, 822 P.2d at 966 (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227,

240—41, 57 S.Ct. 461, 464, 81 L.Ed. 617 (1937)) (citations omitted); see Ham's at 516,

681 P.2d at 991. Idaho has adopted the constitutionally based federal justiciability

standard. Noh v. Cenanusa, 137 Idaho 798, 801, 53 P.3d 1217, 1220 (2002). “Idaho

courts are authorized under |.C. § 10—1201 to render declaratory judgments under certain

circumstances, but even actions filed pursuant to that statute must present an actual or

justiciable controversy in order to satisfy federal constitutional justiciability requirements.”

Noh at 801, 53 P.3d at 1220. “Ripeness is that part ofjusticiability that ‘asks whether

there is any need for court action at the present time.”’ Davidson v. Wn'ght, 143 Idaho

616, 620, 151 P.3d 812, 816 (2006) (quoting Gibbons v. Cenanusa, 140 Idaho 316, 317,

92 P.3d 1063, 1064 (2002)).

III. ANALYSIS

Clark first asserts that he is the highest bidder for the Property because his use of

an escalation clause was approved by Ignite. Mem. in Supp. of Def. Clark’s Mot. for

Summ. J., 9. The Bid Packet did not expressly allow or prohibit the use of escalation

MEMORANDUM DECISION AND ORDER 0N SUMMARY JUDGMENT

clauses, but it did state that bidders with questions should contact Tony Berns, the

Executive Director of Ignite, for further information. Id. Clark reached out to Berns and

asked about the use of escalation clauses on the bid forms. Id. Berns confirmed to Clark

that Ignite had previously received bids that included escalation clauses, and that Clark’s

use of an escalation clause was permitted. Id. at 10. Clark asserts that “[t]his information

was readily available to any bidder and wouId have been provided to the plaintiffs had

they bothered to ask.” Id. Additionally, in support of his position that he is the highest

bidder, Clark provides that he submitted a bid deposit in the amount of $3,260, which is

1% of his maximum purchase price of $326,000 (as opposed to a bid deposit that

reflected his starting bid price of $226,000)? Id. Lastly, Clark asserts that he did not

cheat or rely on inside information when choosing to include an escalation clause; “he

simply asked the question that all bidders were invited to ask: ‘Can| include an escalation

clause?” Id. Though it is undeniable that Clark had an advantage over

Swallow/Alvarado in this particular bid, Clark argues that he obtained that advantage by

simply requesting additional information from Ignite — information that was readily

available to anyone who asked. Id. at 11. Clark claims, “The plaintiffs’ disadvantage was

the direct result of the plaintiffs’ lack of due diligence." Id. at 11.

Swallow/Alvarado argue that Clark did not comply with the unambiguous

instructions of the Bid Packet, which asked only for a total bid amount and tiebreaker

amount. Mem. in Supp. of Pls.’ Mot. for Summ. J., 5—6. Swallow/Alvarado assert that by

including an escalation clause where the Bid Form does not provide a place for one, Clark

failed to comply with the instructions. Id. at 6. In support of their position,

Swallow/Alvarado state, “[t]o the extent that Clark’s subjective interpretation of these

2 The Bid Packet included a provision that stated, “A 1% deposit is required for each bid


instructions differed, there is no room for such an erroneous interpretation in contract law,

particularly with respect to the sale of public property where equal footing and fairness are

the cornerstones.” Id. Additionally, Swallow/Alvarado point to specific language in the

Bid Packet instructions which state, “[n]o additions or changes to original Bids will be

allowed after submittal. While changes are not permitted, the Agency may request

clarification from bidders.” Am. Compl., Ex. 1.

Addressing Swallow/Alvarado’s latter argument first, Clark did not add or change

his original bid after it was submitted. Clark submitted one bid - the bid at issue in this

matter that contained the escalation clause — and made no attempt to add or change any

portion of it after it was submitted to the Board. Therefore, the provision in the Bid Packet

instructions addressing changes made after bid submission, identified above by

Swallow/Alvarado, does not apply in this case.

Next, Swallow/Alvarado argue that Clark failed to follow the instructions contained

in the Bid Packet by including an escalation clause. The facts make clear that the

instructions contained in the Bid Packet, as well as the Bid Form itself, did not expressly

allow or prohibit the use of an escalation clause. Clark, pursuant to the Bid Packet

instructions, reached out to the Executive Director of Ignite and simply asked whether

Ignite accepts and considers escalation clauses during the sealed bid process. Clark was

told not only that they accept escalation clauses, but that they have historically accepted

escalation clauses in the past in similar sealed-bidding processes. In fact, Ignite

accepted a bid that contained an escalation clause as recently as February of 2018.

Relying on this information, Clark wrote his starting bid in numeric and alphanumeric

form, as the Bid Form instructed, followed by an escalation clause. Based on the fact that

Ignite has historically accepted escalation clauses as part of sealed bids, and the fact that

delivered in the sealed envelope with the Bid form...” Am. Compl., Ex. 1, p. 2.MEMORANDUM DECISION AND ORDER ON SUMMARY JUDGMENT

Clark received express confirmation that an escalation clause would be considered in a

bid for the Property, Clark’s inclusion of the escalation clause was not improper under the

circumstances.

Lastly, Swallow/Alvarado argue that Clark’s inclusion of an escalation clause

makes his bid non-responsive, and to consider it “would undermine the fair competition

objective that is required in the sale of public property.” Mem. in Supp. of Pls.’ Mot. for

Summ. J., 6. This argument also ignores the fact that 1) Clark did comply with the Bid

instructions, 2) Clark received express approval from Ignite to add an escalation clause,

3) Ignite has historically accepted escalation clauses as part of sealed bids, and 4) Berns

phone number was noted on the bid packet and Swallow/Alvarado could have called

Berns (Ignite) to find out that they, too, could submit a bid with an escalation clause.

However, the Court appreciates Swallow/Alvarado’s fair competition argument. The

Court obviously sees flaws in how this process was conducted. For the sake of fairness,

and after providing approval and receiving notice that a bidder would be including an

escaIation clause, Ignite should have informed all potential bidders that the use of

escalation clauses was permitted. Instead, Ignite made that information available only if a

party hunted for that information by calling Berns, and knowing what questions to ask of

Berns. This Court agrees with Swallow/Alvarado that doing so undermined the fair

competition objective that is required in the sale of public property. But from Ignite’s

standpoint, doing so no doubt minimized the amount of the high bid. As a public entity,

Ignite has a duty to act in the public interest. Idaho Code § 50-201 1(b). Presumably, this

would include the need to maximize the revenues obtained from its sales of surplus

property.

As stated above, this Court finds dispositive the fact that the Bid Packet contains

no language indicating that the auction would be a “no reserve” auction, or a “without

MEMORANDUM DECISION AND ORDER ON SUMMARY JUDGMENT ’

reserve” auction. In fact, the Bid Packet states a “reserve" amount in that it reads, “[T]he

minimum bid shall be not less than one hundred percent (100%) of the appraised value of

the Property, $220,000.” Am. Compl., Ex. 1, p. 1. And, as setforth above, this Court

finds that at no time did Ignite accept Clark's bid (or Swallow/Alvarado’s for that matter) as

the high bidder. As set forth above, this Court finds that fact is also dispositive.

The fact that this was not a “no reserve” auction (and was a “reserve” auction)

gave Ignite the ability to reject all bids at any time. Because Ignite has not accepted any

party’s bid, this case is brought prematurely. The following cases found by the Court

make clear certain aspects in the bidding process which is before the Court. First, it is

clear this is a “reserve” auction and not a “no reserve” auction. The fact that it was a

sealed bid auction does nothing to change the fact that this was a “reserve” auction. The

fact that the Bid Packet did not mention that it was a “reserve” auction does not matter,

because if silent on the issue, a “reserve” auction will be presumed because a “no

reserve” or a “without reserve” auction is unusual, potentially harsh to the seller, and spins

the law of auctions upside down as compared to a “reserve” auction. Second, because

this is a “reserve” auction, Ignite has the ability to not accept any party’s offer. This is so

because in a “reserve” auction, the contract is not formulated until the offer of the bidder

is accepted by the seller. Because Ignite has not accepted either Clark’s bid on one

hand, or Swallow/Alvarado’s bid on the other, there has been no formulation of any

contract. The auction has not been consummated. There is nothing for this Court to

decide as to the issues submitted by the parties, that is, “Which bid prevails?" The

answer is, “Neither bid prevails.” From a declaratoryjudgment standpoint, there is no

justiciable controversy.

The case of Pitchfork Ranch Company v. Bar TL Corp, 615 P.2d 541 (Wyo. 1980)

is instructive. In that case, the Bar TL Ranch was valued at four million dollars. Id. at


542. At auction, Ronald Florance bid $1 .61 million, and Pitchfork bid $1 .6 million.

Pitchfork sued to quiet title and Florance assigned his rights to Bar TL Corp. before its

quiet title suit was filed. Id. The July 1, 1978, auction was widely advertised as a no-

reserves sale, highest bid is the winner. Id. The districtjudge issued summary judgment

in Bar TL’s favor. Id. The districtjudge denied summaryjudgment on Pitchfork’s

counterclaim for specific performance. Id. Pitchfork appealed, claiming it was the highest

lawful bidder. Id. The issue as to “lawful bidder” was this: the auctioneer had

announced the bids would be confined to $25,000.00 increments, and the seller had not

authorized the auctioneer to adopt a minimum-increment policy. Id. at 545. Pitchfork bid

$1.6 million, and Florance bid $1.61 million, or ten thousand more than Pitchfork, but not

the $25,000.00 more, in accordance with the stated rule. Id. at 546. On appeal, the

Wyoming Supreme Court affirmed the district court’s conclusion that Pitchfork’s bid was

not the highest bid. Id. at 555. The $25,000.00 increment rule did not matter, because

this was a “no reserves sale”, and as such the property had to be sold to the highest

bidder. Id. Thus, enforcing that rule would have been antithetical to a “no reserves sale."

Id. Florance’s bid (now assigned to Bar TL Corp.) was the highest bid, thus, Bar TL was

under no obligation to deliver title to Pitchfork. Id. The complete analysis of the

Wyoming Supreme Court does an excellent job of explaining what a reserves auction is

and what a no-reserves auction is, and the legal significance of each.

While the above enumerated facts stand uncontroverted in the record the only

ones essential to our decision herein are: (a) the auction was advertised as a no-

reserves sale; and (b) there was a higher bid than that made by Pitchfork.

It becomes necessary, therefore, to call upon the law of auctions andauctioneers to see if Bar TL and Pitchfork entered into a binding contract of sale.

AUCTIONS AND AUCTIONEERSWhat is an Auction Sale?

The legal definition of an auction is “a public sale of property to the

highest bidder.” The popular concept of an auction is identical to the legal


definition of an auction. Webster's Third New International Dictionary; andBrewer v. Cowan, 220 La. 189, 56 So.2d 149, 150 (1951).

It is said in 7A C.J.S. Auctions & Auctioneers § 2, p. 853:“An auction is a public sale of property to the highest bidder, by onelicensed and authorized for that purpose. The main purpose of auctionsales is to obtain the best financial returns for the owner of the propertysold; and they are based on the purpose and policy of obtaining the worthof property by free and fair competition among the bidders. . . (Footnotereferences omitted.)

It is said in 7 Am.Jur.2d, Auctions and Auctioneers, § 1, p. 360:“The custom of selling goods at auction is as old as the law of sales. Anauction, as usually defined, is a public sale of property to the highest

bidder. Competitive bidding is an essential element of an auction sale;

hence, any agreement unfairly restrictive of that opportunity is against

public policy and void, . . . (Footnote references omitted.)

Offer and Acceptance With Resen/e AuctionsIt is said in 7 Am.Jur.2d, § 16, supra, at pp. 374-375:“A sale at auction, like every other sale, must have the assent, express or

implied, of both seller and buyer. An announcement of an auction or the

act of putting property up for sale at auction does not constitute an offer to

sell capable of acceptance by the making of a bid. An advertisement of

an auction is not an offer to sell which becomes binding, evenconditionally, on the owner when a bid is made. Rather, anannouncement that a person will sell his property at public auction to the

highest bidder is a mere declaration of intention to hold an auction at

which bids will be received. It is a mere invitation to those attending the

sale to make offers by bids. The contract becomes complete only whenthe bid is accepted, this being ordinarily denoted by the fall of the

hammer.” (Footnote references omitted.)

The aforesaid text goes on to say:

“These common-Iaw principles are adopted by the Uniform CommercialCode.” (Footnote references omitted.)‘

Thus, it can be said that where the auction has not been announced to bewithout reserve, the sale contract is consummated by the offer of the bidder to

buy and the acceptance of the bid by the seller.

Corbin on Contracts § 108, “Auction Sales Offers to Sell and to Buy," pp.

481-483, puts it this way:“When an auctioneer presents an article for sale at auction and asks for

bids, he is ordinarily not making an operative offer and creates no powerof acceptance. Instead, he is asking for offers to be made to him; and the

bids made in response thereto are themselves offers that can be revoked

by the bidders prior to an acceptance by the auctioneer. This is true eventhough the seller or his representative has issued advertisements or madeother statements that the article will be sold to the highest bidder, or is

offered for sale to the highest bidder. Such statements are merely

preliminary negotiation, not intended and not reasonably understood to beintended to affect legal relations. When such is the case, the seller or his

representative is as free to reject the bids, highest to lowest, as are the

bidders to withdraw them. The seller may at any time withdraw the article


from sale, if he has not already accepted a bid. He need give no reasons;indeed, he rejects all bids by merely failing to accept them by doingnothing at all. It is not necessary for him to say that ‘the privilege is

reserved to reject any and all bids.’ Such a statement is merely evidencethat the goods are not being offered ‘without reserve.’

”(Footnote

references omitted.)

This court's holding in State v. State Board of School Land Comm’rs, 27 Wyo.54, 61—62, 191 P. 1073, 1075 (1920), is consistent with the principles announcedabove when we said in a matter involving a with-reserves auction:

. . ‘Acceptance of a bid is denoted by the fall of the hammer, or by anyother audible or visible means signifying to the bidder that he is entitled to

the property on paying the amount of his bid according to the terms of thesale. Once a bid has been accepted, the parties occupy the samerelation toward each other as exists between promisor and promisee in anexecutory contract of sale conventionally made. Thereafter, as a rule, the

seller has no right to accept a higher bid, nor may the buyer withdraw his

bid.’ 2 R.C.L. 1126; Coker v. Dawkins, 20 Fla. 141, 153; State v. HobokenBank, 84 Md. 325-331, 35 Atl. 889; Shen/vood v. Reade, 7 Hill (N.Y.) 439.”

In summary, then, the law seems to be settled that in an auction with reserves

which seems to include all auctions where the advertisements and preliminary

information representations do not announce the sale to be without reserves the

contract is formu|ated by the offer of the bidder and the acceptance of the seller.

Offer and Acceptance No Reserves Auctions

A “no reserves”auction is significantly different than the auction with

reserves above described. As has been noted, in auctions with reserves the

bidder is deemed to be the party making the offer, while the auctioneer (as agent

for the seller), is the offeree with authority to either accept the bid or reject it.

The ramifications of this are that the latter need not sell if he or his principal

chooses not to and may, at any time before the hammer falls, withdraw the

property from the auction block. If the bidding is too low, the auctioneer need donothing and there is no resulting contract between the seller and any bidder.

This is not the case with a no-reserves auction.

In the no reserves type of sale, which is the kind of sale with which we are

here concerned, the legal relationship as between the seller and bidder is

reversed. In the no-reserves sale, the seller becomes the offeror and the bidder

the offeree by reason of a collateral contract theory which will be discussed in

detail, infra. This role-switching exercise results in a significant readjustment of

rights and obligations between the parties. For example, in the no-reserves

auction, the contract is consummated with each bid, subject only to a higher bid

being received. This is so because the seller makes his offer to sell when he

advertises the sale will be a no-reserves sale to the highest bidder. Once the

first bid has been received, the only acceptance which forms a binding

agreement is the one offered by the highest bidder. In this type of sale, the

seller may not withdraw his property once any legitimate bid has been submitted,

as he may do at any time before the hammer falls in the with-reserves auction. In

the no-reserves situation, the seller is absolutely committed to the sale once a

bid has been entered, no matter what the level of bidding or the seller's notion of

the property's true value. This is the catastrophic situation in which Housel found

himself where $4,000,000.00 worth of his property was being bid at the


$1 ,600,000.00 level. He could not extricate his property from the sale becausehe had committed it to sale to the highest bidder (no matter how low the bid) but

that was his only commitment that he would sell to the highest bidder. He wasnot committed to selling to the next highest bidder.

Lastly, all parties who have been notified of the fact that the sale is a no-

reserves auction are bound by the consequences which flow from the lawapplicable thereto.

The propositions aforesaid are supported by the following discussion of

authorities:

Authon'ty Relative to No—Reserves AuctionsIt is said in 7 Am.Jur.2d, s 17, Auctions and Auctioneers, “Withdrawal of

property; sales without reserve," p. 376:

. . The words ‘without reserve’ as used in auctions are words of art, asshowing prospective bidders that the property will actually go to the bidderoffering the highest price, and the seller may not nullify this purpose bybidding himself or through an agent, or by withdrawing the property fromsale if he is not pleased with the bids.” (Footnote reference omitted andemphasis supplied.)

At 7A C.J.S. Auctions and Auctioneers s 11, entitled, “Right to WithdrawProperty; Sales without Reserve,” pp. 868-869, it is said:

“Until the hammer falls and a bid is accepted, a locus penitentiae

remains, and the seller may withdraw his property from sale; and he maywithdraw it before any bidding, even where the sale is without reserve.

The owner is under no legal duty to hold an advertised auction sale andmay call it off without incurring liability to the buyers.

“However, when the auction is ‘without reserve,’ the owner of the

property may not withdraw it from sale after bidding has commenced, andthe owner may be held liable for withdrawal of the property from the sale

after a bid. The words “without reserve’ are words of art and mean that in

making such an announcement the owner enters into a collateral contract

with all persons bidding at the auction that he will not withdraw the

property from sale, regardless of how low the highest bid may be; and the

highest bona fide bidder at an auction ‘without reserve’ may insist that the

property be sold to him or that the owner answer to him in damages. Astatement that the sale would be made to the highest bidder, or that part

or all of the property would be sold that day, is not the equivalent of an

announcement that the auction will be “without reserve.’”(Footnote

references omitted, and emphasis supplied.)

Corbin on Contracts, supra, pp. 483-484, says:“An auction sale is one in which the price is determined by the competition

of bidders. Even at such a sale as this, it is possible for the seller to makean operative offer to sell and thus cause each bid to be an acceptance of

the offer. All that is necessary is that the seller shall express such anintention clearly and bring it sufficiently to the attention of the bidders.

One mode of expression has been in such common use as to havereceived judicial interpretation. If the seller states in his advertising of the

auction, or states openly at the place of auction, that the sale wi|| be‘without reserve’, the seller thereby promises to sell the goods to the

bidder who makes the highest bid in the competition at that time and


place. Before any bid has been made in response to such an offer, theseller has the power to revoke and to withdraw the goods from sale; butafter one bid has been made the seller's offer is held to be irrevocable. Heis under a legal duty to sell the goods to the bidder at the price bid,

conditional only on the absence of any *550 higher bid at that time andplace.” (Footnote references omitted and emphasis supplied.)

See, also, American Law Institute, Restatement of the Law of Contracts § 27, p.

34, where the black—Ietter law says:“§ 27. AUCTIONS: SALES WITHOUT RESERVE.“At an auction, the auctioneer merely invites offers from successivebidders which he may accept or reject unless, by announcing that the sale

is without reserve or by other means, he indicates that he is making anoffer to sell at any price bid by the highest bidder. In that case after a bid

has been made the auctioneer cannot withdraw. Even though the sale is

announced to be without reserve any bidder may withdraw his bid until the

auctioneer by fall of hammer, or in other customary manner, announcesthat the sale is complete.”

In Vol. 15, Minnesota Law Review, 1931, in an article entitled “Bids asAcceptance in Auctions ‘Without Reserve,’

”at page 389, Professor Harvey

Hoshour makes reference to the American Law Institute‘s “Official Draft” of the

above-quoted § 27 and quotes the following from the “explanatory note

appended to section 27”:“

‘lt must be possible . . . for an auctioneer, if he uses appropriate

language, to become the offeror. An announcement that goods will besold to the highest bidder has this effect. Fairly interpreted the languagemeans that the auctioneer promises that whoever makes the highest bid

shall become owner of the subject matter of the sale.’”

These propositions are expressed by the author in Williston on Contracts, Third

Edition § 29, pp. 76—77, entitled, “Formation of Contract at Auction," when he

says:

. . But the law has adopted the doctrine that putting up goods for sale is

merely an invitation to those present to make offers which they do bymaking bids, one of which is ultimately accepted by the fall of the

hammer. By the weight of authority, the auctioneer may be said to invite

offers. Since the bargain is incomplete until the hammer falls, a bidder

may retract his bid until that time.

“The same point is involved in decisions turning on the right of the

auctioneer to withdraw an article offered for sale; and for the samereason, until the hammer falls, the auctioneer may withdraw, unless it hasbeen advertised or announced that the sale shall be without reserve. If

such an advertisement or announcement has been made, the property

may not be withdrawn after it has been put up and a bid made.“Apart from statute, it would seem that it is a strong inference of

fact that the auctioneer merely invites offers, and that he might makehimself the offeror by using language appropriate to the purpose, that is,

by using language which, fairly interpreted, amounts to a promise on his

part to sell to any person who shall make the highest bid. Theannouncement that he will sell without reserve, made in any form of

words, would justify this interpretation. With reference to the sale of


goods, it has been enacted that such an announcement binds theauctioneer, though the bidder may withdraw his offer at any time prior to

the fall of the hammer.” (Emphasis supplied.)

In the Minnesota Law Review article, supra, at page 377, the author expressesthe concept in the following way:

. It is the very fact that the sale is announced to be without reserve bythe person who is responsible therefor that justifies the bidders, acting

reasonably, in understanding that the property involved will be sold to the

highest bidder, and that in such case a sale will be completed by each bid,

subject only to the condition that no higher bid be received. It is

conceivable that bidders would understand without such statement or its

equivalent that even the putting up of goods does not constitute an offer,

but where the sale has been announced to be without reserve the

proposition is so unequivocal that a reasonable bidder could, it is

submitted, understand it as meaning only one thing. . .

The doctrine was earliest analyzed in the holding in the English case of

War10w v. Ham'son (1859) 1 E. & E. 309, where the court used the following

language in a suit by the highest bidder against the auctioneer where the

principal was undisclosed:“ ‘The name of the auctioneers, of whom the defendant was one, alone

was published; and the sale was announced by them to be without

reserve. This, according to all the cases both at law and equity, meansthat neither the vendor nor any person in his behalf shall bid at the

auction, and that the property shall be sold to the highest bidder, whetherthe sum bid be equivalent to the real value or not; Thomett v. Haines, 15

M. & W. 367. We cannot distinguish the case of an auctioneer putting upproperty for sale upon such a condition from the case of the loser of

property offering a reward, or that of a railway company publishing a time

table stating the times when, and the places to which, the trains run. It

has been decided that the person giving the information advertised for, or

a passenger taking a ticket, may sue upon a contract with him; Denton v.

Great Northern Railway Company, 5 E. & B. 860. Upon the sameprinciple, it seems to us that the highest bona fide bidder at an auction

may sue the auctioneer as upon a contract that the sale shall be without

reserve. We think the auctioneer who puts up for sale upon such a

condition pledges himself that the sale shaII be without reserve; or, in

other words, contracts that it shall be so; and that this contract is madewith the highest bona fide bidder; and, in case of a breach of it, that he

has a right of action against the auctioneer. . ..’

"Vol. 15, Minn.L.R.,

supra, at 379.

Modern American cases have followed and are following this doctrine.

In Zuhak v. Rose, 264 Wis. 286, 58 N.W.2d 693 (1953), where the ownerin a no—reserves auction withdrew the property because the bids were not high

enough, the court, construing the Uniform Sales Act, held that the seller could

not withdraw and he was bound to sell to the highest bidder. [12It Is said In

states where the Uniform Commercial Code has been adopted that the law Is the

same. See 7 Am.Jur.2d, Auctions and Auctioneers s 17, p. 377, where it is said:

“Under the provisions of the Uniform Commercial Code an auction sale is with


reserve unless the goods are in explicit terms put up without reserve. In anauction with reserve, the auctioneer may withdraw the goods at any time until heannounces completion of the sale; in an auction without reserve, after theauctioneer calls for bids on an article or lot, that article or lot cannot be withdrawnunless no bid is made within a reasonable time. Similar provisions exist underthe Uniform Land Transactions Act.”] The court said:

“The words ‘without reserve’ as used in auctions are words of art, assuringprospective bidders that the property will actually go to the bidder offering

the highest price. The seller may not nullify this purpose by bidding

himself or through an agent, nor by withdrawing the property from sale if

he is not pleased with the bids. Thus, the seller may not refuse to accepta bid where the auction is without reserve; the bid itself establishes a right

in the bidder to have the property unless someone else by raising his bid

succeeds to his right.” 58 N.W.2d at 696.

The court then went on to say:“ ‘ * * *

(W)here a sale is advertised or stated to be without reserve, there

is an implied guaranty that the property is to be sold to the highest bidder,

and each bidder has the right to assume that all previous bids are

genuine, and the seller in substance so assures him;* * *.’ 7 C.J.S.

Auctions and Auctioneers § 7, page 1257." (58 N.W.2d at 696),

and concluded with the thought

. . that when the real estate in question was put up for sale and the first

bid made on it, defendant could no longer withdraw it but was bound to

accept the highest bid unless other bids for different combinations of

parcels or bids for the farm as a whole produced more money, as

specified in the advertisement. Defendant cannot defeat the right which

plaintiff had acquired as highest bidder either by withdrawing the specific

land from sale or by failing to fulfill the promise of the advertisement. . .

58 N.W.2d at 697. (Emphasis supplied.)

In Drew v. John Deere Company of Syracuse, Inc., 19 A.D.2d 234, 241 N.Y.S.2d

267, 269-270 (1963), the court said:

“The plaintiff‘s whole case rests upon the theory that the auction was one‘without reserve’. At such an auction, the owner of the property has no

right to withdraw the property after bidding has commenced. It is also

necessarily implicit in an auction ‘without reserve’, that the owner of the

property may not himself bid in the property, as this would be equivalent

to withdrawing it from sale (Restatement, Contract, s 27). Various legal

theories have been advanced for the holding that the announcement that

the auction would be ‘without reserve’ imposes a binding legal obligation

upon the owner, but the best view seems to be that the owner, by making

such an announcement, enters into a collateral contract with all persons

bidding at the auction that he will not withdraw the property from sale,

regardless of how low the highest bid might be (Gower, ‘Auction Sales of

Goods Without Reserve,’ 68 Law Quarterly Review 457; Warlow v.

Harrison (1859) 1 E. and E. 295, 309). Therefore, the highest bona fide

bidder at an auction ‘without reserve’ may insist that the property be sold

to him or that the owner answer to him in damages (Zuhak v. Rose, 264Wis. 286, 58 N.W.2d 693; Forbes v. Hunter, 223 |||.App. 400; Jones v.

Hackensack Auto Wreckers, 124 N.J.L. 289, 11 A.2d 595; 7 Am.Jur.2d


Auctions, § 21, p. 240; Annot., 37 A.L.R.2d 1049, 1056; 1 Corbin onContracts, § 108, p. 341; 2 Williston on Sales, § 297, p. 205).

“On the other hand, in an auction not expressly announced to be‘without reserve’, the owner may withdraw the property at any time beforeit is actually ‘knocked down’ to a bidder by the auctioneer. There is nocontract until the offer made by the bidder is accepted by the auctioneer‘s‘knocking down’ the property to him (Personal Property Law, s 102, subd.

2). ‘An action "with reserve“ is the normal procedure’ (Comment 2 to

section 2-328, Uniform Commercial Code).” (Emphasis supplied.)

In Wi/cher v. McGuire, Mo.App., 537 S.W.2d 844 (1976), the owner refused to

sign the contract of sale to the highest bidder and the argument centered aroundthe question of whether the pronouncements made by the auctioneer precedingthe bidding rendered the sale one with or without reserve. Defendant-seller

contended that the sale was “with reserve” and she could, therefore, withdrawthe land the high bidder contending the sale was “without reserve,” which, whenthe high bid was made, rendered the collateral contract consummated. Thecourt said:

. . The words ‘without reserve’ are words of art and mean that in makingsuch an announcement the owner ‘enters into a collateral contract with all

persons bidding at the auction that he will not withdraw the property from

sale, regardless of how low the highest bid might be (citations omitted).

Therefore, the highest bona fide bidder at an auction ”without reserve“

may insist that the property be sold to him or that the owner answer to himin damages (citations omitted).’ Drew v. John Deere Company of

Syracuse, |nc., 19 A.D.2d 308, 241 N.Y.S.2d 267, 269(1, 2) (1963).

“Thus, in this case the plaintiffs argue that by stating all or part of

the property would be sold on that day, the auctioneer was stating the

sale was to be ‘without reserve’.” 537 S.W.2d at 846. (Emphasissupplied.)

The United States Court of Appeals, Tenth Circuit, adopts the collateral-contract

no-reserves doctrine set out herein where, in United States v. Blair, 10 Cir., 193

F.2d 557 (1952), the United States brought action against one Blair to recover

the difference between a bid of $100.50 and a bid of $1 ,542.00 by a third party

whose bid was overlooked. The advertised condition of the sale was:

. .‘In all cases the property will be awarded to the bidders submitting the

highest bid. If through error we should make an award to someone other

than the high bidder, the erroneous award will be revoked and the proper

award will be made.’ ”193 F.2d at 559.

The court found the above—quoted condition controlled when it said:

“Generally, a sale by auction is complete when the auctioneer announcesits completion. 7 C.J.S., Auctions and Auctioneers § 7, page 1250. And,

title passes to the successful bidder at that time, unless the parties intend

to the contrary. Harris v. Merlino, 137 N.J.L. 717, 61 A.2d 276; Lott v.

Delmar, 2 N.J. 229, 66 A.2d 25; 7 C.J.S. Auctions and Auctioneers§ 8,

page 1260. The owner of the property offered for sale at'the auction has

the right to prescribe the manner, conditions and terms of the sale. 7

C.J.S., Auctions and Auctioneers, § 7, page 1251. The buyer may rely

upon such announced terms and conditions of the sale, and he is likewise


bound thereby, whether present at the time of the announcement or hasknowledge thereof. 5 Amer.Juris. Auctions, Sec. 15, p. 454; Kivett v.

Owyhee County, 58 Idaho 372, 74 P.2d 87; Erie Coal & Coke Corp. v.

United States, 266 U.S. 518, 45 S.Ct. 181, 69 L.Ed. 417; See Annot. 28A.L.R. 991.

“It follows that the award to Blair and the issuance of the title

documents were subject to the announced condition that if his bid was notthe highest one, the award would be ‘revoked and the proper award will

be made’, . . .

. . Here, the highest bid was an unalterable condition of the sale,

and title did not unconditionally pass to any other bidder.” 193 F.2d at 560.(Emphasis supplied.)

The Auctioneer's Discretion in a No-Reserves AuctionIn light of the above, we place little store in the appellant's argument that

the auctioneer, through his right to establish bidding increments, has the power 1

to defeat the seller's contract with the highest bidder in a no-reserves auction.

Succinctly stated: The auctioneer's authority must and is determined byhis contract. It is said in 7A C.J.S. Auctions and Auctioneers § 5, supra, p. 861:

“Auctioneer's authority, when based upon the express contract or

instrument, is governed by its terms. . .

Here the auctioneer was bound by contract to

“use their (his) best efforts to obtain buyers who will pay the highest prices

obtainable at the public auction.”:

In pursuit of this purpose, the auctioneer agreed to conduct in fact insisted upon 1

conducting a no-reserves auction. As we have seen, in a no-reserves auction i

there can be no contract except with the highest bidder. This means that oncethe policy decision is made that the auction will be a no-reserve sale, and bidding

has commenced, the auctioneer has no more discretion with respect to whetherhe will or wi|| not sell to a bidder other than he who makes the highest bid than

does the owner which is none at all. The owner can't withdraw his property oncebidding has commenced and title to his property must and does pass to the

highest bidder. For all the same reasons, the auctioneer cannot consummate a

sale in the owner's behalf with anyone except the highest bidder. It follows that ano-reserves auction cannot be conducted, as it was in this case, with anincrement policy which has as its effect the rejection of the highest bid, for the

reason that the owner, when he advertises the no—reserves auction, makes anunconditional offer to sell only to the highest bidder.

Pitchfork, informed of the highest-bidder concept in the no-reserve rule

(see fn. 6, supra), cannot here be heard to assert and rely upon the auctioneer's

erroneous understanding of the law and the auctioneering business in order to

defeat the law of no-reserves auctions. Pitchfork came to the sale relying uponthe highest-bidder requirement of the no-reserve rule and is bound by the rule,

as is everyone connected with the sale.

The cold, hard fact of the matter is that there was no contract entered into

with Pitchfork because it did not submit the highest bid in a no-reserve auction,

where only the highest bidder is qualified to contract with the seller for purposesof acquiring titie to the property.


CONCLUSIONUnder the above authorities and for the reasons set out herein, a no-

reserves sale contemplates that the offer to sell to the highest bidder is made bythe seller when he advertises the property for sale at auction and undertakes to

conduct the auction without reserve. All bidders at such sale are bound to the

no—reserves condition of the sale. There is no contract of sale until the highest

bid is made. The seller's contract is with the highest bidder. The highest bidder

can enforce his rights in damages. Other bidders have no right against the seller

because they have no contract upon which to base a right of action. Since there

is no contract possible except that which exists between the highest bidder andthe seller, the appellant’s argument to the effect that the sale was consummatedbetween the seller and Pitchfork because of the auctioneer's minimum-incrementpolicy is without validity. The auctioneer agreed to a no—reserves sale and he is

bound by it, as is Bar TL, Pitchfork and all other bidders.

The trial court was correct in its conclusion. Pitchfork's was not the highest

bid in a no-reserves sale where contract with the highest bidder is requisite to the

passage of title. Since a contract of sale was not consummated between Bar TLand Pitchfork, Bar TL is under no obligation to deliver title to the subject ranch

properties to Pitchfork.

Affirmed.

615 P.2d 546--554.

The other case this Court reviewed is Ferry v. Udall, 336 F.2d 706 (9th Cir. 1964). ‘

In that case, the Secretary of Interior, Stewart Udall, invited bidding on some isolated

tracts of public land. Id. at 708. Before a cash certificate was issued to the high bidder

on two of the sales, the Secretary determined the land was appraised several times

higher than the high bid price, and the Secretary entered an order vacating the sale.

Id. at 709. The high bidders on the two different sales sued the Secretary claiming it was

an abuse of discretion for the Secretary to not issue the certificates to the high bidders.

Id. The Ninth Circuit Court of Appeals held that the procedure developed by the

Secretary for selling these tracts resembled, “an auction with reserve, since the Secretary

reserves the right to reject any and all bids prior to the issuance of the certificate. See

Restatement, Contracts 27; Wilcoxson v. United States, 114 U.S.App.D.C. 203, 207, 313

F.2d 864, 888.” Id. at 710. The Ninth Circuit Court of Appeals rejected the bidders’

argument that the public notice had to state that the auction was being held with reserve,


in order for these conditions to be binding. Id. The Ninth Circuit Court of Appeals held,

“[h]owever, in this kind of auction, as in any other, the auction is deemed to be conducted

with reserve, unless there is an express announcement or advertisement to the contrary

before the auction takes place. 1 Williston, Contracts (3d ed.) § 29, pages 76-77. For

this reason, even without the regulations, the Secretary had a right to reject a bid.” Id. “In

our view, however, the difference in reason given for refusing to sell is no basis for

distinguishing the cases [the case at hand from Wilcoxon], since the Secretary, in his

discretion, may refuse to sell for whatever reason he finds adequate.” Id. at 71 1. The

Ninth Circuit Court of Appeals found, “the Secretary’s refusal to issue these certificates is

not subject to judicial review." Id.

One treatise, Contracts, E. Allen Farnsworth, describes the relationship as follows:

The reasoning behind these reward cases [where a reward is

“offered” for furnishing information that leads to the apprehension of acriminal, and only a very limited number of people will have information andbe able to accept that offer] is not, however, applied to proposals to sell to

the highest bidder. When an auctioneer puts property up for sale to the

highest bidder, he is taken, in the absence of a contrary understanding or

usage, to be interested in entertaining offers in the form of bids, not in

making an offer. Even though only one of the many possible bidders could

claim the property as the highest bidder, it is assumed that even the highest

bid might be too low. The auctioneer’s proposal is not an offer, but each bid

is an offer that the auctioneer may accept or reject. Under the Uniform

Commercial Code, there is no contract until the accepts by “the fall of the

hammer or in other customary manner.”28 [28 UCC 2—328(2). Accord:

Anderson v. Wisconsin Cent. Ry., 107 Minn. 296, 120 N.W. 39 (1909)

(auctioneer sold land to second highest bidder because the highest bidder’s

raise was too small); Payne v. Cave, 3 Term. R. 148, 100 Eng. Rep. 502

(K.B. 1789) bidder retracted bid on goods). Although the Code rule applies

only to auctions of goods, it largely restates the common law, and courts

can be expected to apply it by analogy in cases involving auctions of land.

Pitchfork Ranch Co. v. Bar RL, 615 P.2d 541 (Wyo. 1980) (though the

Code is “inapplicable to the sale of realty, its provisions with respect to

auctions are useful”).] Such a typical auction is described as being “with

reserve.” If the auction is announced to be “without reserve,” the Codeprovides that the “putting up” of an item for bids amounts to a commitment,irrevocable for a reasonable time once the auctioneer calls for bids, to sell

the item to the highest bidder.” [29 UCC 2328(3). Cf. Pitchfork Ranch v.


Bar TL, supra note 28 (land: auctioneer had no authority “to defeat seller’s

contract with the highest bidder” by requiring minimum bidding increments);see also Sly v. First Natl. Bank, 387 So.2d 198 (Ala. 1980)(Bank’sannouncement that it would sell to the “highest, best and last bidder” wasnot sufficient to make auction without reserve); Short v. Sun Newspapers,300 N.W.2d 781 (Minn. 1980) (“whether the solicitation for [bids] was anoffer or only an invitation to make an offer is a question of fact.”)] Butalthough the auctioneer may not withdraw the item, a bidder may retract his

bid before the auctioneer announces completion of the sale. The rule for

auctions “with reserve” is applied by analogy to construction contracts that

are to be awarded on the basis of public bidding. Generally the ownermerely “invites” offers, and it is the contractor’s bid that is the offer.

Contracts, E. Allen Farnsworth, § 3.10 p. 129-431, 1982. The pertinent portions of the

Uniform Commercial Code read:

§ 2-328. Sale by Auction

(1) In a sale by auction if goods are put up in lots each lot is the subject of aseparate sale.

(2) A sale by auction is complete when the auctioneer so announces by the

fall of the hammer or in other customary manner. Where a bid is made while

the hammer is falling in acceptance of a prior priod the auctioneer may in his

discretion reopen the bidding or declare the goods sold under the bid onwhich the hammer was falling.

(3) such a sale is with reserve unless the goods are in explicit terms put upwithout reserve. In an auction with reserve the auctioneer may withdraw the

goods at any time until he announces completion of the sale. In an auction

without reserve, after the auctioneer calls for bids on an article or lot, that

article or lot cannot be withdrawn unless no bid is made within a reasonable

time. In either case a bidder may retract his bid until the auctioneer’s

announcement of completion of the sale, but a bidder’s retraction does not

revive any previous bid.

(4) if the auctioneer knowingiy receives a bid on the seller’s behalf or the

seller makes or procures such a bid, and notice has not been given that

liberty for such bidding is reserved, the buyer may at his option avoid the

sale or take the goods at the price of the last good faith bid prior to the

completion of the sale. This subsection shall not apply to any bid a a forced

sale.

U.C.C. § 2-328(1)—-(4).

The Court finds as undisputed facts: 1) Ignite mad a offer to solicit bids, and 2) at

no time has Ignite accepted any party’s bid. There is no justiciable controversy from

which this Court may make a decision on this declaratory judgment action. Accordingly,

this Court finds that it cannot decide the two motions for summary judgment.


Swallow/Alvarado distinguish Pitchfork Ranch Company and Feny as follows.

Although Plaintiffs address the cases cited by the Court in detail

below, Plaintiffs point the Court’s attention to Scott v. Buhl Joint School Dist.

No. 412, 123 Idaho 779, 852 P.2d 1376 (1993). In that case, a bidder

(Scott) was not awarded a contract for bus transportation even though thebidding statute at issue required that the bid be awarded to the lowestbidder. The Court looked to the schoo! district’s bidding statutes and foundthat an award to the lowest responsible bidder was mandatog:

As our emphasis indicates, the statute speaks in mandatoryterms. See Goff v. H.J.H. Co., 95 Idaho 837, 839, 521 P.2d661, 663 (1974) (“The word shall, when used in a statute, is

mandatory.” (emphasis in original». This statute mandatesthat once bids are received by the board of trustees, it mustaward the contract to the lowest bidder unless the lowest

bidder is not a “responsible” bidder.

Id. at 783, 1380 (emphasis added). Thus, the Court ruled that the school

district had a legal duty to award the contract to Scott as the lowest

responsive bidder.

Like in Scott, Ignite has a legal duty to sell the Propeny to Plaintiffs.

Ignite chose to sell the Property to a private party pursuant to its authority

under Idaho Code § 50-201 1, which allows Ignite to prescribe its

competitive bidding rules. By resolution, Ignite invoked the municipal sale

laws outlined in |.C. § 50-1403(1). See Ignite’s SUF, at 4. That statute

provides:

When the property is offered for sale, the properly shall besold at a public auction to the hiqhest bidder and no bids shall

be accepted for less than the minimum declared value

previously recorded on the record at a public meeting of the

council, provided however, if no bids are received, the city

council shall have the authority to sell such property as it

deems in the best interest of the city.

(emphasis added). Not oniy does the statute require that ignite award the

Property, but the Bid Packet also requires that result because it contains noreservation to reject all bids, and does contain an obligation to have the

highest bidder enter into the Purchase and Sale Agreement with Ignite.

Thus, like Scott, Ignite has a mandatory obligation to convey the Property to

the highest bidder, “unless the iowest bidder is not a ‘responsible’ bidder.”

Scott, supra. As Plaintiffs have previously briefed in further detail, Clark’s

bid did not comply with the instructions of the Bid Packet and is not

responsive. Accordingly, Ignite has a legal duty to reject Clark’s bid, andpursuant to the statutory authority that it has cited for purposes of this sale,

Ignite shall award the Property to the highest responsible bidder—-the

Plaintiffs.

PIs./Counterdefs.’ Suppl. Mem. in Supp. of Mot. for Summ. J. 3-5 (underlining in original).

The Court is not persuaded by such argument. Scott is distinguishable in a couple of


ways. Scott dealt with a bid for services by a public entity (low bid wins), which seem to

be treated differently by case law interpretation than bids for the sale of land (high bid

wins). The situation in Scott was clearly controlled by statute, in that case Idaho Code

Section 33-1510. Idaho Code Section 33-1510 specificaIIy requires the school board

“shall award the contract to the lowest responsible bidder.” Scott, 123 Idaho 779 at 783,

852 P.2d 1376, 1380 (1993). The statute applicable in the present case is Idaho Code

Section 50-1403(1). The language in that statute reads in part, “[w]hen the property is

offered for sale, the property shall be sold at a public auction to the highest bidder and no

bids shall be accepted for less than the minimum declared value...". LC. § 50-1403(1).

That statute requires the sale at auction to the highest bidder, but the statute does

nothing to claw back from the public entity its right to reject a bid, or to reject all bids, or its

right to not accept any bids. This Court agrees with the statement made by counsel for

Ignite, “[i]f the property is going to be sold, it must be sold to the highest bidder. However,

the statutes do not make a sale mandatory.” Ignite CDA’s Suppl. Mem. of Law, 3. There

is no Idaho appellate court case interpreting the pertinent language of that statue, but this

Court is convinced our Idaho appellate courts would not likely ignore case law such as

Pitchfork Ranch Company and Ferry, weli established contract law treatises and the

Uniform Commercial Code. Finally, the pertinent portion of Idaho Code Section 50-

1403(1), “no bids shall be accepted for less than the minimum declared value...”, make

the bid a reserve bid, not a “no reserve” bid. As the case law shows, a “no reserve” bid

flips the offeror and offeree relationship.

Swallow/Alvarado’s argument continues:

The Court cites to Pitchfork Ranch Co. v. Bar TL, 615 P.2d 541

(Wyo. 1980) and Ferry v. Udall, 336 F.2d 706 (9th Cir. 1964) as persuasive

authority guiding the Court’s concerns. Plaintiffs submit that Pitchfork

Ranch and Ferry are distinguishable as both cases focus on the contract


principles for awarding property when a seller desires to reject a bid orinvalidate a sale.

Pitchfork Ranch involved the sale of private propeml by anauctioneer in a “no—reserve” auction setting. The Court went to greatlengths to distinguish between a reserves auction (where no contract is

formed and a seller reserves the right to reject all bids) and a no-reserveauction (where the seller creates an irrevocable offer to sell to the highest

bidder). 615 P.2d at 548. The Court concluded in that case that theauctioneer’s attempt to create a minimum bidding increment requirementwas invalid and could not be used to reject the highest submitted bid in a“no-reserve” auction. Id. at 553. Although Pitchfork Ranch provides

potentially persuasive case law with respect to private auction sales, this is

not applicable to the facts at hand.1 [1 Furthermore, Pitchfork Ranch doesnot provide any legal authority on how a contractual right would arise

pursuant to a “sealed bid” process versus a live auction process.] TheIdaho Supreme Court has already ruled on the steps that a court must takein reviewing public bids for the saie of public property. Parks v. City of

Pocatello, 91 Idaho 241, 419 P.2d 683 (1966). In the public context, a court

must first determine if the bidder complied with the terms of the bid packet.

If he/she did not, then the person does not even reach status as a “bidder”

and the public agency has a legal dug to reiect the bid. Id. at 245, 687.

Although Feny did involve a public agency sale scenario, it too is

distinguishable because it involved a reserve auction sale wherein the

public agency (the Department of the Interior) vacated the sales to the

highest bidders prior to issuing final sale certificates. 336 F.2d at 709. Theapplicable statute authorizing the Department to sell property expressly held

that the sale was not final, and thus no contractual obligations were created,

“until the issuance of a cash certificate.” Id. In contrast, Ignite's statutory

authority to sell property to private parties requires that Ignite makecompetitive bidding rules (here, the Bid Packet). The Bid Packet provides

that the highest Bidder must enter into the Purchase and Sale Agreementwithin 60 days and does not reserve the right for Ignite to reject all bids.

Furthermore, the statutory authority for the sale of property by municipal

agencies, relied upon by ignite, provides that the entity “must sell the

property to the highest bidder.” LC. § 50-1403. Thus, in stark contrast to

Feny, Ignite does not have any statutory discretion to reject bids and in fact

is required to seil to the highest bidder. Moreover, Feny is crucially

distinguishable because the agency in that case was seeking to reject all

bids, whereas lgnite claims to have “interplead” the property and has

specifically asked this Court to award the property to either Plaintiffs or

Clark.

Because the posture of this case does not involve a private “no-

reserves” auction, nor does it invoive a public agency seeking to invalidate

or avoid the award of the Propelty, these cases are not pertinent to whether

lgnite is required to award the Property to Swallow-Alvarado in this

instance. The Court is free to review the validity of the bids to determine

which bidder is entitled to enter into the Purchase and Sale Agreement with

lgnite.


Pls./Counterdefs.’ Suppl. Mem. in Supp. of Mot. for Summ. J., 5--6 (underlining in

original). This Court agrees that a “sealed bid” process such as occurred in the present

case places an interesting wrinkle on the situation. Most case law involving auctions of

property seem to involve live auctions. However, this Court could find no case law on its

own, and this Court has been presented with no case law by the parties in this case, as to

why a “sealed bid” process would obviate case law such as Pitchfork Ranch Company

and Feny, well established contract law treatises and the Uniform Commercial Code.

This Court cannot find a practical reason why such established law would be different in a

sealed bid situation. This Court finds Swaliow/Alvarado’s argument that Pitchfork Ranch

Company is distinguishable because it concerned the sale of private land, to be withouti

merit, especially in light of Feny, which dealt with the sale of public land.

‘

Swallow/Alvarado’s argument that in Ferry, “[t]he applicable statute authorizing the

Department to sell property expressly held that the sale was not final, and thus no

contractual obligations were created, ‘until the issuance of a cash certificate.” Id. at 6. A

cursory reading of Feny shows the Ninth Circuit Court of Appeals found that the

applicable statute lead to the same result as case law. As this Court discussed above,

the Ninth Circuit Court of Appeals held that the procedure developed by the Secretary for

selling these tracts, resembled “an auction with reserve, since the Secretary reserves the

right to reject any and all bids prior to the issuance of the certificate.” 336 F.2d at 710.

This Court agrees with the arguments and statements set forth by lngite in Ignite CDA’s

Supplemental Memorandum of Law. Specifically, this Court has read the case cited in

that memorandum, King v. Alaska State Housing Authon'ty, 633 P.2d 256 (Ala. 1981) and

finds it instructive. King concerned a bid for a contract to redevelop land for a public

agency. 633 P.2d at 258. The land had been condemned by the public agency, and part


of the land condemned had been owned by the plaintiffs King and Cherrier, prior to

condemnation. Id. The public agencies rules gave a preferential consideration to prior

owners for the redevelopment contract, but only if the prior owner’s proposal was equal to

or superior to the proposals of other developers. Id. King and Cherrier were not awarded

the redevelopment contract and sued the public agency for damages. Id. While King did

not concern an “auction”, the case did involve bids solicited by a public agency. The

Alaska Supreme Court held:

It is established that in Alaska, as elsewhere, an agency's solicitation of bids

is not an offer, but rather a request for offers; no contractual rights based onthe content of a bid arise prior to its acceptance by the agency. Beime v.

Alaska State Housing Authon'ty, 454 P.2d 262, 264 (Alaska 1969). This

principle was recognized by the Court of Claims in Heyer ProductsCompany, Inc. v. United States, 140 F.Supp 409, 412 (Ct.C|. 1956):

The advertisement for bids was, of course, a request for

offers to supply the things the Ordnance Department wanted.

It could accept or reject an offer as it pleased, and no contract

resulted until an offer was accepted. Hence, an unsuccessful

bidder cannot recover the profit he would have made out of

the contract, because he had no contract.

633 P.2d at 261. King is certainly consistent with Pitchfork Ranch Company and Ferry,

consistent with weII-established contract law treatises and consistent with the Uniform

Commercial Code.

Moving forward from this juncture, the solution would is in the hands of Ignite.

Ignite could accept one of the two bids. Once one of the bids is accepted, in theory this

litigation could resume. Alternatively, Ignite could continue to not accept either bid, and

try to clean up the mess it created by having another auction and making it clear this time

around whether escalation clauses are allowed.

Finally, this Court must address the attorney fees issue. Both Swallow/Alvarado

and Clark claim they are entitled to attorney fees against Ignite. The Court refuses to

grant attorney fees to Swallow/Alvarado or to Clark, against Ignite. The Court finds an


award of costs in favor of any party against Ignite, would not be just under Idaho Code

Section 10-1210 (costs under declaratory judgments). The Court finds neither

SwallowlAIvarado nor Clark have a contract with Ignite, so no attorney’s fees can be

awarded under Idaho Code Section 12-120(3). Additionally, an action by an unsuccessful

'

bidder does not allege a commercial transaction within the meaning of Idaho Code

Section 12—120(3). Scott v. Buh/ Joint Sch. Dist. No. 412, 123 Idaho 779, 786, 852 P.2d

1376, 1377 (1993); Andrea v. City of Coeur d’Alene, 132 Idaho 188, 190, 968 P.2d 1097,

1099 (Ct. App. 1998). idaho Code Section 12-1 17 is closest to being on point as it

provides attorney fees to the prevailing party in cases involving state agencies. Ignite is a

public agency. However, Idaho Code Section 12-1 17 only allows attoney’s fees to the

prevailing party, and neither Swaliow/Alvarado nor Clark are prevailing parties, at least at

this point in time. More importantly, there is no way that this court can find that Ignite

acted without a reasonable basis in fact or in law. This is based on the above legal

discussion regarding auctions. At this point in time, Ignite has not accepted any party’s

offer. Ignite need not ever accept any party’s offer. Accordingly, Ignite cannot be said to

have acted without a reasonable basis in fact or in law. Ignite has every right to do what it

has done, at least up to now.

VI. CONCLUSION AND ORDER

The Court will not make a decision on either Clark’s Motion for Summary

Judgment or Swallow/Alvarado’s Motion for Summary Judgment. The Court will keep

this case open for sixty days in case Ignite choses to accept one of the two bids, and a

justiciable controversy then exists. At the end of sixty days, the Court will

administratively close this case.

IT IS HEREBY ORDERED the Court will not decide the two motions for summary

judgment at issue before this Court, due to the lack of a justiciable controversy at this


time.

IT IS FURTHER ORDERED this case will be administratively dismissed sixty (60)

days from the date of this decision, if no further action is taken by the parties.

Entered this 5‘“ day of March, 2019.

JohnY.

Mitchell, District Judge %

Certificate of S

I certify that on the day of March, 2019, a true copy of the foregoing was mailed

postage prepaid or was sent by interoffice mail or facsimile to each of the following:

LagerI

Lamar Fax #Megan O'Dowd [email protected]/ Scott Poorman [email protected]

[email protected]/Annie Harris

Peter Erbland [email protected]/

Katherine Brereton [email protected] /

'1] I114!"[17'

Jean? 'usen, Deputy Clerk


march 5, 2019, cv28, 18, 6664, swallow alvarado v ignite

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